The Thailand Clearing House (TCH) has said that it will allow foreign investors to use US dollars and Euros as collateral -- only for derivative transactions - to reduce their foreign exchange risk.
TCH believes that this step will not affect the value of the baht, and will attract foreign investors to Thailand’s derivative market. The service started on 29 November 2010.
The Stock Exchange of Thailand (SET) EVP for post-trade services & development Bordin Unakul said that the Capital Market Supervisory Board and the Bank of Thailand, as the authorities to control currency exchange rates, gave permission to the TCH to receive foreign currency as collateral.
"TCH and its members can transfer and be transferee of foreign currencies from non-Thai clients as collateral for derivatives traded on the Thailand Futures Exchange (TFEX), according to the BOT’s regulations. The currency will not be transferred back into Thai baht," Unakul said.
Placing foreign currency as collateral will be conducted in the same way as placing Thai baht as collateral, or conducted through electronic systems of settlement banks, i.e, Siam Commercial Bank and Krung Thai Bank, which provided cooperation and support for TCH and its members.
According to TCH, all parties, including its members and settlement banks which will be responsible for settling, have tested their systems with TCH and successfully passed.